by John Darer CLU ChFC CSSC
"There are worse things in life than death. Have you ever spent an evening with an insurance salesman? ". So goes the famous quip from Woody Allen that traumatized a generation of insurance salesmen.
Imagine the sales trainee being taught how to deal with cold calling objections. In response to the unwitting consumer asking "is this about life insurance?" he/she was trained to say "Life insurance?, Why no Mr. So and So, if I called you on the very day that you were ready to buy life insurance I'd fall off my chair! I just want to stop by your office and show you about the work I'm doing with people like yourself". Furthermore, insurance sales people often sold life insurance as an "insured savings plan", STAR (Special Tax-Advantaged Retirement)","special non-qualified retirement plans." and other names that belied the "walk like, quack like, it is what it is" (i.e. life insurance). Such sales practices are now frowned upon. Which brings me for this week's entry to the "Wall of Shame".
Restructuredsettlement(dot)com and Restructuredsettlements(dot)com are domain names registered to JG Wentworth SSC LP at time of posting, according to the Whois look up. JG Wentworth is a structured settlement factoring company. Before I get into the meat of this let's look up the definition of the word "restructure". It means to Construct or form anew or provide with a new structure.
So the name implies that you can take an existing structure and "contruct", "form a new structured settlement or provide with a new structured settlement. Indeed by clicking on the link you can see that there is quote from someone who has apparently "restructured" his settlement. " Restructure it the way you need it now!" calls out the ad.
A structured settlement is defined, under the Internal Revenue Code Section 5891(C) (1), as "an arrangement"—
(A) which is established by (1) suit or agreement for periodic payment of damages excludable from gross income of the recipient under section 104(a)(2), or (ii) agreement for periodic payment of damages under any workers’ compensation law excludable from gross income of the recipient under section 104(a)(1), and
(B) under which the periodic payments are (i) of the character described in subparagraphs (A) and (B) of section 130(c)(2), and (ii) payable by a person who is a party to the suit or agreement, or the workers’ compensation claim or by a person who has assumed the liability for such periodic payments under a qualified assignment in accordance with section 130...
If you read Section 130(c)(2) (B) you will see that the payments cannot be increased, decreased, modified etc." in order to qualify for the tax exclusion.
So the payments cannot be "restructured!" So why does JG Wentworth do this? Why do they in this case use words that describe everything else but what they really do? For goodness sakes they fund structured settlement factoring transactions! RAM Funding Note Services Corporation, another factoring company out of Satellite Beach Florida gets it. Quoting from RAM's web site frequently asked questions:
" Turning My Cash Flow Payments Into One Lump Sum like Renegotiating the Structured Settlement? On the surface, they may sound the same, but they are not. The structured settlement may not be paid out in any different fashion than initially agreed upon. What you are doing is selling the payments to RAM Funding. We would receive the payments just as you would have over time. What RAM Funding does for you is to buy the payments for a percentage of the the gross proceeds."
So isn't J.G. Wentworth's "restructured settlement" (highlighted in "two-tone" so that the "re" and the "structured settlement" are presented together but separately) an example of taking the same kind of "marketing liberty" those life insurance salesmen used?. You clearly can't restructure your settlement, but you can enter into a structured settlement factoring transaction. And as I suggested in my November 21, 2005 blog entry it just doesn't sound sexy enough.